Trump Is Borrowing Argentina’s Chain Saw. America Will Suffer.

 

Opinion

Guest Essay

Trump Is Borrowing Argentina’s Chain Saw. America Will Suffer.

 

March 3, 2025, 1:00 a.m. ET

https://www.nytimes.com/2025/03/03/opinion/trump-milei-musk-argentina.html

By Gregory Makoff

Mr. Makoff is the author of “Default: The Landmark Court Battle Over Argentina’s $100 Billion Debt Restructuring.”

 

President Trump, Elon Musk and President Javier Milei of Argentina have formed a special bond. Mr. Milei was the first foreign leader to meet with Mr. Trump days after he won the U.S. presidential election. Mr. Trump has called Mr. Milei his “favorite president.” And Mr. Musk has been in close contact with Mr. Milei’s government reform team since the U.S. election in November, if not before. So it was no surprise to Argentina watchers that Mr. Trump began his term by blocking government cash flows and firing workers, exactly as Mr. Milei’s government started doing a year ago.

 

In recent months, Mr. Milei has been bragging about the “export” of his reform model. Governments should no doubt borrow good practices from one another. But it should give us pause that the United States, the world’s leading economy, is borrowing government reform techniques from Argentina, a nine-time serial defaulter and 100-year economic laggard. Mr. Trump, Mr. Musk and Mr. Milei may share the same anti-state rhetoric and use the same techniques, but they are taking their countries in very different directions.

 

Mr. Milei’s administration is restructuring Argentina’s government for good reason: failure. In the early 1900s, people used the expression “as rich as an Argentine,” and millions of Italians and Spaniards immigrated there in hopes of a better life. But soon after, populist, nationalist politics took hold. In 1946, the strongman Juan Domingo Perón took control and his party perfected the art of channeling government cash flows to its supporters. This game ended badly for Argentina, with the political machine demanding more and more money before every election, which led to overspending and a repeat cycle of boom, bust, devaluation and default — all the way until 2020. Argentina’s G.D.P. per capita, once among the world’s highest, is now a small fraction of Italy’s and of Spain’s.

 

This is the backdrop against which Mr. Milei ran for president, gleefully waving a chain saw at crowds of supporters. Unlike his Peronist predecessors, Mr. Milei didn’t blame aging generals and foreign lenders for the country’s ills. Instead, he told the truth. He said that Argentina’s government spent too much, forcing it to print more money, which in turn led to inflation and ultimately default. His solution was to cut the budget, and that is what he has done since coming into office, backed by a team of seasoned technocrats. He has earned many critics from his aggressive style of governance — often using decrees — but the same was done by the Peronists before him.

 

The centerpiece of Mr. Milei’s program has been to use his figurative chain saw to cut the budget by 5 percent of G.D.P. He achieved this by changing the pension payments formula, bringing cuts to public works and reducing utility and transport subsidies, among other measures. He brought down the government head count by about 35,000 jobs in 2024, cutting the work force by about 7 percent.

 

His fiscally laudable reforms have hurt. In February 2024, Mr. Milei more than doubled the price of bus and train ticket prices, while a utility price reform in June was estimated to hit middle-class families with a 155 percent rise in power bills. Unemployment rose from 5.7 percent to 6.9 percent between the third quarter of 2023 and the third quarter of 2024, and the percentage of the Argentine population living in poverty jumped 11 percentage points, peaking at over 50 percent in the first half of 2024.

 

But so far, Argentines are sticking with Mr. Milei. Recent polls show his approval rating hovering near 50 percent. Many see no alternative — and the economy is showing glimmers of hope. When he took office in December 2023, consumer price inflation was running at a 25.5 percent monthly rate. Now the economy is normalizing and consumer prices rose by only 2.2 percent in January 2025. Mr. Milei has recently announced a string of other triumphs, too, including a fiscal surplus for 2024 and a seasonally adjusted G.D.P. expansion in the third quarter. With strong support from Mr. Trump, Argentina appears poised to win a new program from the International Monetary Fund, while Mr. Milei made the case for a U.S.-Argentina free trade agreement at CPAC last month, an event at which he also presented Mr. Musk with a glittering chain saw.

 

There are dividends to being Mr. Trump’s favorite president. The question is what Mr. Trump — and the American people — get out of this special relationship. Unfortunately, the answer seems to be Mr. Milei’s anti-state political theatrics and not his technocratic way of governing.

 

Like Mr. Milei, Mr. Trump started his term by ordering mass firings and the end of telework in the federal work force. But instead of extracting party hacks from the government, Mr. Trump is firing career civil servants and top military officers and inserting MAGA party loyalists. He has fired inspector generals, whose job is to keep an eye out for federal mismanagement, while letting loose Mr. Musk’s 20-something programmers to suck information out of the nation’s most closely guarded computer systems.

 

Unlike Mr. Milei — who brought out the chain saw to reach a specific budget target to stabilize his economy — Mr. Trump has been celebrating the use of his power to eliminate D.E.I. programs and to kill the “deep state.” In short, Mr. Trump’s team so far is generating more headlines than budget savings, and doing substantial harm along the way.

 

After moving to dismantle the United States Agency for International Development, Mr. Musk crowed on X, “We spent the weekend feeding USAID into the wood chipper. Could gone to some great parties. Did that instead.” This shameful and illegal act immediately put untold lives at risk and degraded America’s standing in the world, while cost savings may be less than advertised because various U.S.A.I.D. programs may be restored by the courts or moved to the State Department.

 

For America, acting Argentine is not a good look. Argentina is a failing country that is just now turning the corner after carrying out painful reforms. If Mr. Trump were a true reformer, he would have presented specific budget goals, put seasoned technocrats in leading positions and focused on providing value-added technical innovation. Instead, he’s taking us on the Peronist path where power politics matters more than good policy. As Argentina teaches us, 100 years of misery could follow if the rule of law is replaced by the rule of one.

 

Gregory Makoff is a senior fellow at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School and the author of “Default: The Landmark Court Battle Over Argentina’s $100 Billion Debt Restructuring.” He previously worked as an investment banker advising governments and corporations on managing their debt and as a senior policy adviser at the United States Treasury Department.